As we write, the UK has put itself in a pretty rare position by virtue of already having thrashed out a trade agreement with the US.

The Trump administration continues to make threats of hefty levies on imports elsewhere, as Ian Conway explains in this week’s News section, with the EU and Mexico facing 30% tariffs based on the latest pronouncements from the White House.

The apparently harsh treatment of the EU could be to the benefit of the UK according to Panmure Liberum analyst Joachim Klement.

Klement acknowledges there could be considerable movement between now and the 1 August deadline, when said tariffs are set to come into force, but examines how things might play out based on the current rhetoric.

‘We emphasise three key points,’ says Klement. ‘One, if the tariffs are implemented as threatened, the US will almost certainly go into recession in 2026 and see inflation spike above 4%; two, UK stocks should outperform European peers because thanks to the trade deal between the US and the UK, trade uncertainty is much lower for UK businesses; and three, if the tariffs remain in place for longer, there is an arbitrage opportunity for European business to divert exports to the US via the UK, creating a large need for investments in the UK in the next three to five years.’

Klement concludes: ‘As the world stands today, there is one clear recommendation: Buy UK.’

Klement spells out how his third point could work over time. Noting that, because the UK is subject to 10% tariffs from the US and exports from the EU to US are typically 10%, EU manufacturers could ship goods from the EU to the UK, do what’s required to make them goods which could qualify as being made in the UK, then ship them to the US.

The argument against this is the unpredictability of President Trump and a potential change in government in 2028, or an outcome in the mid-term elections next year which leads to a less compliant Congress. 

These possibilities could put companies off making long-term decisions around investing in manufacturing and logistics infrastructure in the UK to benefit from any arbitrage on tariffs.

Nonetheless, and amid plenty of bad news for UK plc of late, it will be interesting to see if this country can genuinely be a long-term beneficiary of the trade war.

In this issue we look at emerging markets and whether the nascent recovery in the first part of 2025 can continue, and also consider the importance of how a company handles its accounts. Martin Gamble hears from a fund manager about things to look out for in accounting and highlights some examples of best and worst practice.

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